A 12-year, 5 percent coupon bond pays interest annually. The bond has a face value of $1,000. What is the percentage change in the price of this bond if the market yield rises to 6 percent from the current level of 5.5 percent? correct answers -4.26%
A bond with a face value of $1,000 that sells...
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A 12-year, 5 percent coupon bond pays interest annually. The bond has a face value of $1,000.
What is the percentage change in the price of this bond if the market yield rises to 6 percent from
the current level of 5.5 percent? correct answers -4.26%
A bond with a face value of $1,000 that sells for $1,000 in the market is called a _____ bond.
correct answers par value
A bond with a face value of $1,000 that sells for less than $1,000 in the market is called a _____
bond. correct answers discount
A par value bond offers a coupon rate of 7 percent with semiannual interest payments. The
effective annual rate provided by these bonds must be correct answers greater than 7 percent but
less than 8 percent.
A stock with a beta of zero would be expected to have a rate of return equal to: correct answers
the risk-free rate
A stock's PE ratio is primarily affected by which three factors? correct answers risk,
opportunities, accounting practices
All else constant, a coupon bond that is selling at a premium, must have: correct answers a yield
to maturity that is less than the coupon rate
All else held constant, the value of a call decreases when the: correct answers exercise price
increases
An increase in which one of the following will decrease the value of a call option? correct
answers exercise price
Assume you own both a May 40 put and a May 40 call on ABC stock. Which one of the
following statements is correct concerning your option positions? Ignore taxes and transaction
costs. correct answers The time premiums on both your put and call are less than the time
premiums on equivalent June options.
If the correlation between two stocks is -1, the returns on the stocks: correct answers move
perfectly opposite to one another.
If the issuer of a stock receives the proceeds from a sale of that issuer's stock, then the sale:
correct answers was conducted in the primary market
In the binomial option pricing model the: correct answers percentage increase in price in each
interval can differ from the percentage decrease in price.
In the formula, P3 = Div / R - g, the dividend is for period: correct answers four
, Next year's annual dividend divided by the current stock price is called the: correct answers
dividend yield
The Black-Scholes option pricing model is dependent on which five parameters? correct answers
stock price, exercise price, risk-free rate, variance, and time to maturity
The _____ premium is that portion of a nominal interest rate or bond yield that represents
compensation for expected future loss in purchasing power. correct answers inflation
The _____ premium is that portion of the bond yield that represents compensation for potential
difficulties that might be encountered should the bond holder wish to sell the bond prior to
maturity. correct answers liquidity
The annual interest paid by a bond divided by the bond's face value is called the: correct answers
coupon rate
The closing price of a stock is quoted at 32.08, with a P/E of 21 and a net change of .36. Based
on this information, which one of the following statements is correct? correct answers The
current stock price is equivalent to 21 years of the firm's current earnings per share.
The constant dividend growth model: correct answers can be used to compute a stock price at
any point in time.
The effect on an option's value of a small change in the value of the underlying asset is called the
option: correct answers delta
The interest rate for a tax-exempt bond that equates to the rate paid on a taxable bond is
computed as: correct answers Taxable rate × (1 - t *)
The rate at which a stock's price is expected to appreciate (or depreciate) is called the _____
yield. correct answers capital gains
The standard deviation of small-company stocks: correct answers is over ten times as large as the
standard deviation of U.S. Treasury bills.
The stated interest payment, in dollars, made on a bond each period is called the bond's: correct
answers coupon
To compute the value of a put using the Black-Scholes option pricing model, you: correct
answers first have to compute the value of both N(-d 1) and N(-d 2)
Which group of countries tends to have the highest Sharpe ratios based on historical equity risk
premiums and standard deviations of returns since 1900? correct answers United States,
Australia, South Africa
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